En­ter the Dragon

Plaza Watch International - - Polo - Wo r d s : L a u r a C o ll a c o t t

ral­lied again in 2013 as economies around the world have con­tin­ued to sta­bilise af­ter the eco­nomic melt­down. The seg­ment slowed con­sid­er­ably be­tween 2010 and 2012 as a di­rect re­sult, but luxury wrist­watches have since re­cov­ered. The prod­uct has en­joyed par­tic­u­lar suc­cess thanks to its rel­a­tive sta­bil­ity. Watches are popular as as­sets and in­vest­ment pieces, as ev­i­denced by highly suc­cess­ful re­cent auc­tion yields. Ex­perts are al­ready pre­dict­ing strong up­swings of 5-10 per cent growth in the watch mar­ket in 2014.

The in­dus­try has man­aged to achieve suc­cess through a pru­dent fo­cus on emerg­ing mar­kets, no­tably those in Asia. The bullish, con­fi­dent growth of China and other tiger na­tions boosted the watch in­dus­try in re­cent years, spurring a huge in­crease in de­mand from Asian coun­tries (and a sub­se­quent in­flux of luxury watch bou­tiques across the con­ti­nent).

The horol­ogy mar­ket is still dom­i­nated by just a hand­ful of player coun­tries: Switzer­land, Ger­many, France and the UK in West­ern Europe along with Hong Kong, Sin­ga­pore, Ja­pan and the US. Hong Kong forms a key nodal point for the ex­change of watches and re­lated prod­ucts, act­ing as a hub for the watch mar­ket around the world.

Luxury prod­ucts have

China is the world’s big­gest watch pro­ducer in terms of vol­ume but largely at the lower end of the price range. At the pre­mium end, it’s Switzer­land that con­tin­ues to reign. De­spite only pro­duc­ing 2.5 per cent of global pro­duc­tion, in terms of value it wears the crown. It’s the coun­try’s third largest ex­port, sell­ing 95 per cent of prod­ucts out­side its bor­ders.

The sec­tor has been on ten­ter­hooks in the last cou­ple of years. “Un­til re­cently, the macroe­co­nomic in­di­ca­tors were red to am­ber,” said Jean-Christophe Babin, the rel­a­tively new CEO of Bul­gari (LVMH). “They've now switched to am­ber-green. We're also see­ing the end of the ef­fects of de­stock­ing at re­tail­ers. I ex­pect sales to take off quite quickly as of the be­gin­ning of next year." He fore­casts, "We can rea­son­ably an­tic­i­pate a 5 to 10 per cent in­crease in Swiss ex­ports [in 2014]."

De­mand from China – a coun­try that has be­come the bread and but­ter for many watch firms – has be­gun to wane with the in­tro­duc­tion of anti-cor­rup­tion mea­sures and a cool­ing of the coun­try’s red-hot eco­nomic growth. This is seen as a nor­mal­i­sa­tion of de­mand rather than con­trac­tion and ap­petite from China and the Arab States re­main high. China’s grow­ing mid­dle class and new lib­eral trade agree­ments inked by world lead­ers sug­gest that it will re­main a key ex­port des­ti­na­tion for many brands, a re­vival that has led other ex­perts to posit 6-8 per cent growth rates for the main luxury watch brands. The bi­lat­eral trade agree­ment be­tween China and Switzer­land – where im­port du­ties on luxury items are as much as 31 per cent - goes live in mid-2014 and will have par­tic­u­lar, pos­i­tive in­flu­ence on ex­port sales in com­ing years.

Other emerg­ing coun­tries are now fore­cast as new growth prospects thanks to ris­ing in­comes and grow­ing pros­per­ity. The tra­di­tional BRIC economies con­tinue to show prom­ise but high im­port tar­iffs in Brazil and In­dia con­strict the po­ten­tial. By con­trast, coun­tries like Viet­nam, Ukraine, Malaysia, In­done­sia, South Korea and Mex­ico are iden­ti­fied as mar­kets with great po­ten­tial for luxury mar­ket growth thanks to their strong economies and ris­ing per­sonal in­comes.

Although the Asian watch mar­ket has cooled in 2013, many watch­mak­ers are con­tin­u­ing to court Asian cus­tom with ded­i­cated prod­ucts to cater for a large pro­por­tion of buy­ers. Ac­cord­ing to the Fed­er­a­tion of the Swiss Watch In­dus­try, more than half of its mem­bers’ prod­ucts were sold to the Asian mar­ket in 2011. Time­pieces with

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